With right solution, Detroit's money woes could pay off for Michigan (Rick Haglund column)

DETROIT -- Detroit is staring at the financial abyss. Wayne County is embroiled in an ever-widening political scandal.

These things make me more hopeful for the future of Southeast Michigan than I’ve been in years.

Say what?

Certainly, it’s not good when the state’s largest city is running out of cash and the government that controls its largest county is riddled with corruption.

But it appears that the days of putting off tough actions to stabilize Detroit’s finances and root out decades of greasing palms in Wayne County are rapidly ending.

That’s encouraging news for the entire state.

Big cities and surrounding metro areas drive state economies. And metro Detroit is by far the most powerful economic engine in Michigan.

The region accounts for half of the state’s gross domestic product and about 40 percent of Michigan’s jobs.

Businesses and people want to locate in places where there are amenities such as parks and transportation, where government works and where local officials aren’t stealing their money.

Michigan can only benefit from financially strong, honest governments in Southeast Michigan.

What makes me think that Detroit and the rest of Wayne County can become such places?

In Wayne County, the feds are fed up over a severance payment scandal that paid hundreds of thousands of dollars to county officials who left their jobs or were fired.

Andrew Arena, who runs the Detroit FBI office, told reporters earlier this month that fighting public corruption is his top priority.

It could be that the decades-old political machine built by the late County Executive Ed McNamara and maintained by successor Bob Ficano is about to be dismantled.

Detroit’s long-deteriorating financial situation finally is being addressed because it must be. Officials say the city will run out of cash within weeks.

How the city and state craft a solution that addresses Detroit’s short-term cash needs and its long-term financial stability is the tough question.

It’s a situation similar to what General Motors Co. and Chrysler Group LLC faced nearly three years ago — lots of debt and a critical cash shortage.

There is one big difference, though. No one is offering to bail out Detroit.

Gov. Rick Snyder is trying to reach a consent agreement with the city that would require it to balance its books without any cash infusion from the state.

Snyder’s proposed consent agreement, which wasn’t warmly received by city officials, would allow Detroit to raise $137 million through borrowing and debt refinancing.

Like GM and Chrysler, Detroit’s challenge is to clean up its finances while investing to improve its “product” — services and amenities that will make it an attractive place to live and do business.

Someone must pay for those investments.

Michigan Future Inc. President Lou Glazer suggests a carrot-and-stick approach by the state.

In exchange for a commitment to balance its budget, the state would help pay for services and amenities to put Detroit on a growth path again.

Glazer and others say that while Detroit largely is responsible for its own problems, the state has played a role by cutting hundreds of millions of dollars in promised revenue sharing payments over the past decade.

Detroit will survive in the long-term only if it can generate additional tax revenues from increased economic activity.

“Give Snyder credit to get this resolved,” Glazer said. “But if Detroit’s financial problems are solved with draconian cuts only, it will turn a bad situation into worse situation.”